1.01 What is (and isn't) Strategy?

“To be a learning community that seeks to serve society by educating the leaders of tomorrow and extending the frontiers of knowledge."  

The above quote from Cornell University attempts to define the institution's position in the higher education landscape. According to Richard Rumelt, professor of management at UCLA, this type of effort reflects a common problem in higher education: the inability and/or unwillingness of institutions, or even departments within institutions, to stake out a clear position. Rumelt writes: 

“In other words, Cornell University is a university. This is hardly surprising and is certainly not informative. It provides absolutely no guidance to further planning or policy making. It is embarrassing for an intelligent adult to be associated with this sort of bloviating.” Richard Rumelt

Few concepts in management circles are, save possibly “innovation” or “disruption”, as regularly misused as “strategy.” Otherwise sophisticated organisations produce strategic plans that are anything but strategic. 

A strategy should be understood as the means by which an organisation reaches its goals. It explains why the institution will be able to change from its current state (e.g. rankings, research funding, enrolment) to a future, desired state. 

The confusion about strategy often springs from how it is distinguished from other components of the planning process.  For our purposes here, let's use these four elements as the basis of a strategic plan: 

  1. Mission: A statement of the institution’s overall purpose; its’ reason to exist. 
  2. Objectives: The specific goals of the organisation during a particular period, say between 2018 and 2021. 
  3. Strategies: How the institution believes it will be best able to achieve its objectives. 
  4. Actions: The steps that need to be taken to enact the strategies. 

Strategy, then, is not what an organisation wants to accomplish. Nor is it all of the actions you will take to realize your goals. It is, rather, the high-level plan that explains how the organisation will get from here to there.

The three most common types of errors in strategic planning: 

1. ASPIRATIONS, NOT STRATEGIES

The institution produces not a strategy, but a declaration of its aspirations. The aspirations may be vague (e.g. "To be the leading comprehensive institution in the State”) or relatively specific (e.g. “To increase the percentage of full-fee paying students by 10% by 2020”). 

“Bad strategy ignores the power of choice and focus, trying instead to accommodate a multitude of conflicting demands and interests. Like a quarterback whose only advice to his teammates is “let’s win,” bad strategy covers up its failure to guide by embracing the language of broad goals, ambition, vision, and values. Each of these elements is, of course, an important part of human life. But, by themselves, they are not substitutes for the hard work of strategy.” (McKinsey)

This type of planning has the benefit of providing the institution with a target; something to aim for. But it doesn’t provide any direction as to how it will reach this goal. How, precisely, will the institution, for example, increase the number of full-fee paying students?  Well-designed strategy provides the answers which, in turn, generates a list of actions that need to be taken to benefit from the strategy. (More on “actions” later.)

2. WISH LISTS

The second error, like the first, confuses aspirations and goals with strategy. But it compounds the problem by including multiple aspirations. 

The wish-list error is particularly common in higher education and other institutions that are highly decentralised and the interests of different parts of the institution don't naturally align. (To what extent does the Psychology Department concern itself with the productivity of English Department?) The tendency to produce multiple aspirations or goals, then, stems from the desire to satisfy competing interests across the institution.

Including a wide range of goals in a strategic plan inevitably diminishes the focus and resources that are brought to bear on each objective, making it less likely than any one objective will be realised. Alignment between objectives becomes more difficult as the number of objectives increase. 

3. STRATEGIC, BUT NOT COORDINATED

An institution may manage to devise strategies to support the broader objective, but fails to ensure that the strategies work together in a coordinated fashion. Good strategy will include multiple actions, but each action aligns with and supports the others. 

The international retailer IKEA offers a clear example of coordinated strategy. Each element of the organisation - parking, product pricing, locations, flat packaging, product design, and others - work together to meet the needs of a segment of the market. Low prices, for example, are made possible through the decision to use flat packaging, limited customer support, and self-assembly. Shoppers are willing to travel to IKEA’s out-of-the-way locations because of the very high volume of product options, the fast product refreshment rate, as well as the restaurant - which makes longer visits more convenient. 

Strategies explain not what we want to achieve, then, but how we will achieve our goals. In the next installment, we look at how the concepts of competition and strategy are related. 

Instalment 1.02: Competing to be Unique
Instalment 1.03: Working with Constraints

1.02 Competing to be Unique . . . 

The first instalment in the Strategy and Strategic Planning collection sought to clarify what truly constitutes a strategy. We made a distinction between aspirations or goals and strategy - the means by which the institution achieves these goals. In this, the second instalment, we focus on the foundations of strategy development. 

“Strategos”, the Greek origins of the word “strategy” refers to the “art of the General”. The military origins of the term hint at its common misuse in strategic planning. 

In warfare, sports, and certain other domains, the purpose of competition is to beat your competitor. There can only be one winner. Competitors all seek to “be the best” through direct, head-to-head struggle. 

While the military and sports terminology may inspire some, it encourages a fundamental misapplication of strategy across industries, including higher education. 

For institutions of higher education and other types of organizations, the goal of sound strategy design should be to occupy a unique position relative to other organizations. This is achieved by providing certain types of services, in certain ways, to a segment of the population. Ideally, the means by which this unique position is occupied by the organization makes it difficult for other organizations to mimic. When accomplished, the organization holds a “sustainable competitive advantage.”

When organizations competing in a particular industry do not offer adequately differentiated value, and the basis of competition is narrowly defined, competition becomes intense (see “Industry Rivalry” below). Organizations are often forced to compete on the basis of price. 

“Competition is for losers” . . . if you want to create and capture lasting value, look to build a monopoly” (Source)

Westin Hotels introduced the “Heavenly Bed” campaign that provided guests with excessively comfortable sheets, duvets, and pillows. This tactic was too easy for competitors to mimic.Within a few years, Westin’s small difference from competitors was matched, costs rose for all competing hotels, and the differences between institutions minimized. Porter labelled this dynamic “competitive convergence”. 

Competitive convergence is acute in higher education, for obvious reasons: regulatory schemes impose significant requirements, credentialing is (e.g. Bachelors, Masters, Doctorates) standardized, adult learners and other factors. Nevertheless, pundits see great opportunities to imagine new instructional strategies, leverage online education, unbundling of services, and niche programming. 

Porter’s Five Forces is used to assess the nature and intensity of competition in various industries: 
 

 

Source: Michael Porter

Too often competitive convergence rules the day: institutions respond to competition by making similar or if not identical investments, which range from the frivolous (larger football stadiums) to the latest instructional technology.

Concerns about institutional sustainability, graduate readiness, and inability retain first-generation students has stimulated the need for divergent strategies that offer students unique value and a greater choice.

Instalment 1.01 What is (and isn't) Strategy?

Instalment 1.02 Competing to be Unique

Instalment 1.03: Working with Constraints

 

 

 

1.03 Working with Constraints 

The most fervent fans of pop music defend their favourite artists with great passion. And they’ll dismiss those they don’t like with equal gusto. Yet the vast majority of contemporary music acts adhere to a rather strict formula - that is at odds with the importance placed on creativity among fans. The best-selling pop bands for much of the latter half of the 20th century shared staples, such as bandmates (lead guitarists, bass guitarists, drummer, possibly a keyboardist, and of course, a lead singer). Airplay required that songs be around three minutes long. The chorus follows the verse, then repeat. 

Creativity always happens within constraints. Constraints act as the borders for creative work and provide the challenge that makes the process interesting. This is a good lesson to keep in mind when attempting to craft strategies in higher education. 

Higher education places unique and substantial constraints on strategy. Good strategies will navigate the constraints successfully, either avoiding them altogether or turn them into opportunities. Regardless of the approach taken, the process begins with an appreciation for the constraints.

A Few, Key Constraints to Explore

Decentralized Decision-Making

Academic-related decisions are typically left to individual academics and academic departments. Collegial governance fosters a highly decentralised form of management. Consequently, it can be far more difficult to implement enterprise-wide strategies than in other similarly-sized organisations. In the face of such conditions, institutions often try to craft strategic plans that please everyone, but that inevitably fail due to lack of focus. 

At the same time faculty frequently seek to protect their decision-making power within the institution. Faculty associations and unions push back on what they perceive as the increased tendency of university administration to manage academic-related matters [link]
The challenge of crafting enterprise-wide strategies in higher education weakens the sectors ability to realize its potential. 

“The history of American higher education is well supplied with reform movements that have gone nowhere. Despite fervent calls for change in a number of areas, most often issued by a commission with an impressive masthead, nothing much happens--or worse, the only visible result is hurt feelings and a hunkering down by the college leaders on whom change depends.” [link]

Challenges are compounded by the structure and reward incentives  for academic work: individual faculty are encouraged to measure success on personal terms, rather than institutional. For many educators, enterprise issues and committee obligations are secondary concerns, which stand-in the way of more pressing interests, particularly research, but also teaching. 

Success and Rigidity

Higher education is increasingly important institution. 21st century labour requires advanced skills and knowledge. And the institution holds a near-monopoly on widely-recognised credentials used by employers to filter applicants. Governments are pursuing policy changes to increase the number of citizens that attend and graduate with degrees. A growing share of the population now believes that an advanced degree is required to enjoy a sufficient level of earnings and social status. All of these factors and more have led to increased demand for higher education But the success of the institution also dampens any sense of urgency within the institution for adopting new, substantial strategies that involve changes to the way that the institution operates. 

Mutually Supportive Eco-System

Good strategy in higher education requires close attention be paid to the ways in which the institution is linked to other organisations and systems. Colleges and universities operate within an eco-system that includes student loan systems, accreditation bodies, other educational institutions (e.g. high school), government (e.g. funding), and employers. Over time, each of these entities will take steps to align their practices with the other, partnering organisations. 

The relationships within this eco-system can subsequently complicate and constrain strategic options for each institution. But the relationships can also open up new opportunities for inventive strategists.

Criteria for Talent

Two-thirds of a university’s operating costs are allocated to talent (salaries), at a minimum. To a large extent, the institution competes on the basis of this investment (research, teaching). It follows, then, that strategic planning needs to consider how the institution selects and promotes this talent. 

Faculty recruitment is heavily skewed toward applicants that have demonstrated strong subject matter knowledge and the capacity to identify and execute compelling research. This is how students first gain admission to doctoral programs, then subsequently, the basis on which earn their doctorates. Other criteria, such as collegiality,  community service, or teaching are inevitably muted.

The focus on research and subject matter expertise is reinforced by the fact that a disproportionate percentage of graduates that secure tenure-track positions come from highly selective, research-intensive institutions. 

“Research suggests that academic jobs in a variety of fields overwhelming go to graduates of elite academic departments, and that those graduates don’t necessarily end up being the most productive researchers.” 
Moreover, there is a tendency, often overlooked, for institutions to hire graduates from institutions that have equal or higher ranking than their own. (The perceived ‘quality’ of institutions, as noted by Lloyd Armstrong, is based on what he refers to as surrogates of quality, which includes the prestige of its faculty - which, in turn, is based on the institutions at which they matriculated.) The percentage of faculty coming by way of prestigious, research institutions will likely be exacerbated by the growing imbalance of doctoral graduates seeking academic positions and the availability of full-time positions.  

These conditions result in colleges and universities hiring faculty that (a) are attracted to work focussed on research and (b) spent their formative years inculcated in a work culture in which prestige and rewards are based primarily on research and publishing productivity, rather than teaching, community services, and other important aspects of academic work.  

Accreditation and Evaluation of Standards 

Strategists need, lastly, to be cognisant of the influence of accreditation systems in higher education. Broadly, these bodies serve as extra-governmental organisations charged with ensuring the quality of educational institutions and, indirectly, governments interests, public confidence in the institutions, and the needs of employers for which these institutions serve as feeders. 

Accreditors determine which programs and institutions can offer credentials and whether the students attending these institutions are eligible for loans - a critical source of institutional revenue. Inevitably, accreditors encourage adherence to certain instructional and institutional practices. Failure to adhere to the standards can be highly damaging to an institution. In the latter half of 2017, for example, the US department of Education (federal) notified Western Governors University that its’ instructional model made it ineligible for federal loans; fining the institution $713,000 USD 

Yet, as many in the profession have commented, WGU has long been regarded as one of the more innovative institutions of the past 50 years. Despite only being only 20 years old, the institution serves over 83,000 students [link]. Tuition has remained largely steady for several years, bucking sector trends. The institution regularly receives visitors from around the world hoping to learn from WGU’s success. Five US states set up partnerships (essentially franchises) with WGU to bolster their state’s capacity to serve adult learners in a cost-effective, convenient manner. Ironically, the US government previously cited WGU as an example of innovation in higher education [link].

Accreditation systems, like the other factors cited, have the potential to impose significant constraints on strategic plans. But as in any context, creative strategies can find ways to circumvent or topple these constraints if they are well understood.  

Instalment 1.01 What is (and isn't) Strategy?

Instalment 1.02 Competing to be Unique

Instalment 1.03: Working with Constraints

 

 

2.01 What is a Business Model, Really?

The terms "business model" and “business model innovation” sounds like something a management consultant would conjure up. But I encourage you to suspend your initial scepticism. The concepts have helped professionals in sectors imagine new and better ways of operating. We anticipate it will be an increasingly important tool in higher education in coming years. 

So, what is a business model, anyway?

A business model refers to the way in which an organisation fulfils its mission; how it creates, markets and pays for the goods and services it creates for stakeholders – whether these stakeholders are families using food banks, banks buying enterprise technology, or students pursuing degrees.

Some professionals believe that the concept of business models has no relevance to higher education or that it shouldn’t; that its use implies that higher education is a business, or that it should be more business-like. But every organisation necessarily has a business model, whether it’s IBM, Greenpeace, or the University of Toronto; the concept is merely a tool for analysing how different types of organisations operate. 

All business models share a standard set of elements, such as sources of revenue, a process for acquiring the resources it needs to operate, and a focus on a particular market segment. The different ways organisations go about fulfilling these core elements of business models constitutes the basis of their unique business model. 

Defining your organisation’s business model, then, involves answering questions about how you operate and for whom, including: 
- Why do your stakeholders turn to your organisation? What value do you offer them?
- Who are your key partners that make it possible to deliver this value? 
- What are the essential resources you draw from to fulfil your purpose? 

The “Business Model Canvas, first developed by Alexander Osterwalder at the University of Lausanne, is an especially useful tool for capturing the elements of a business model and for imagining how changes to its components can produce different outcomes.

3.02 Higher Education's Business Model

Most non-profit higher education institutions in North America operate according to essentially the same business model.  While elite and non-elite colleges and universities may see themselves as distinct, their differences are primarily a matter of emphasis. Some institutions, for example, may place more emphasis on research productivity, most consider this of great importance and hire faculty on this basis. They also rely on similar sources of revenue: tuition, public grants, research and other external grants, renting of facilities, and merchandise (clothing, food).

It’s worth noting, too, that most institutions, regardless of ranking, share a common notion of what constitutes a great institution - the “Harvard DNA”, as Clayton Christensen termed it. They seek to mimic the characteristics of the most prestigious institutions, which in turn, creates greater homogeneity in the sector.

We can use the  Business Model Canvas, highlighted in the last post, to explore the components that make up higher education’s business model. 

MARKET SEGMENTS

Who does the institution serve? Many universities focus on 18-24-year-olds, who have recently graduated from high school. Some universities widen their focus with programs targeting adults, who are returning to complete undergraduate degrees.

VALUE PROPOSITION

What are the reasons students and others turn to your institutions? E.g., Widely recognised credentials that have value in the labour market; ranking as a top research university.

KEY ACTIVITIES

Which activities are fundamental to your organisation? E.g. Research, teaching, evaluating student performance, developing programs in subjects of value to society, and granting degrees.

REVENUE STREAMS

What are the sources of funds that make your institution sustainable and how do you capture these monies? E.g., Government capital grants, tuition, philanthropists and research grants.

CHANNELS

How does your institution interact with stakeholders? E.g. Through on-campus teaching, conference participation, scholarly journals and media.

KEY PARTNERS

What are the other organisations your institution partners with on a regular basis? E.g., Research granting organisations, private companies seeking research partners, and regulatory/accreditation bodies.

COST STRUCTURE

What are your primary costs, and how do you go about paying for these costs? E.g., Faculty and instructor salaries, administrative staff, building maintenance and marketing.

KEY RESOURCES

What are the critical resources that every college and university must possess? E.g., Faculty, buildings and accreditation.

STAKEHOLDER RELATIONSHIPS

How does your organisation build and maintain relationships with its key stakeholders? E.g. alumni organisations, university email systems, university social networking (Facebook), learning management systems, and media relations officers.

Instalment 2.01: What is a Business Model, Anyway?

Instalment 2.02 Higher Education's Business Model